Apogee Enterprises, Inc. (NASDAQ:APOG) Q2 2022 Earnings Conference Call September 21, 2021 9:00 AM ET Company Participants Jeff Huebschen - Investor Relations Ty Silberhorn - Chief Executive Officer Nisheet Gupta - Chief Financial Officer Conference Call Participants Chris Moore - CJS Securities Julio Romero - Sidoti & Company Eric Stine - Craig-Hallum Brent Thielman - D.A. Davidson Jon Braatz - Kansas City Capital Operator Good day and thank you for standing by. Welcome to the Second Quarter 2022 Apogee En ...

Apogee Enterprises, Inc. (NASDAQ:APOG) Q1 2022 Earnings Conference Call June 25, 2021 9:00 AM ET Company Participants Jeff Huebschen - VP, IR and Communications Ty Silberhorn - CEO Nisheet Gupta - EVP and CFO Conference Call Participants Chris Moore - CJS Securities Eric Stine - Craig-Hallum Capital Group LLC Brent Thielman - D.A. Davidson & Co. Julio Romero - Sidoti & Company Operator Good day and thank you for standing by. Welcome to the Q1 2022 Apogee Enterprise, Inc. Earnings Conference Call. At this ti ...

Part I [Business](index=4&type=section&id=Item%201.%20Business) Apogee Enterprises, Inc. is a leader in architectural building products and services, diversifying revenue and improving margins through operational efficiencies, while managing human capital - The company's strategy involves diversifying revenue streams within commercial construction, expanding into small- and mid-sized projects, growing its North American geographic reach, and improving margins through productivity and cost management[14](index=14&type=chunk)[15](index=15&type=chunk) - In response to the COVID-19 pandemic, the company implemented temporary cost-saving measures, including a merit/hiring freeze, pay reductions, and suspension of the 401(k) match, most of which were lifted in Q4 FY2021[51](index=51&type=chunk) - The company's employee count decreased from approximately **7,200** in February 2020 to **6,100** in February 2021[52](index=52&type=chunk) FY 2021 Net Sales Contribution by Segment | Segment | FY 2021 Net Sales Contribution | | :--- | :--- | | Architectural Framing Systems | ~46% | | Architectural Glass | ~24% | | Architectural Services | ~24% | | Large-Scale Optical Technologies (LSO) | ~6% | FY 2021 Year-End Backlog by Segment (in millions) | Segment | FY 2021 Year-End Backlog (in millions) | Change from Prior Year | | :--- | :--- | :--- | | Architectural Framing Systems | $411.3 | Decreased from $429.6 | | Architectural Glass | $43.5 | Increased from $31.0 | | Architectural Services | $570.9 | Decreased from $659.7 | [Risk Factors](index=11&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks from the COVID-19 pandemic, cyclical North American commercial construction, customer dependence, supply chain issues, and potential goodwill impairment - The COVID-19 pandemic has caused project delays, temporary factory shutdowns in the LSO segment, and could impact customer financing and material availability, with the full extent of future impact remaining uncertain[64](index=64&type=chunk)[65](index=65&type=chunk)[66](index=66&type=chunk) - The company's architectural segments are highly dependent on the cyclical North American commercial construction industry, influenced by macroeconomic factors like credit availability, employment levels, and interest rates[68](index=68&type=chunk) - The LSO segment's high dependence on a small number of customers in the retail custom picture framing industry creates significant demand risk if a key customer is lost or reduces orders[74](index=74&type=chunk) - The company faces supply chain risks related to the price and availability of key raw materials, including aluminum for Architectural Framing Systems and raw glass for Architectural Glass and LSO segments[77](index=77&type=chunk)[78](index=78&type=chunk) - The company recorded goodwill and intangible asset impairment charges of **$63.8 million** and **$6.3 million**, respectively, in fiscal 2021, with further impairment possible if future performance falls below forecasts[92](index=92&type=chunk)[93](index=93&type=chunk) [Unresolved Staff Comments](index=15&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the Securities and Exchange Commission - There are no unresolved staff comments[94](index=94&type=chunk) [Properties](index=15&type=section&id=Item%202.%20Properties) The company operates a mix of owned and leased manufacturing, administrative, and warehouse facilities primarily in the U.S. and Canada, with one in Brazil - The company's major properties consist of owned and leased manufacturing and administrative facilities located in the U.S., Canada, and Brazil to support its various business segments[95](index=95&type=chunk)[96](index=96&type=chunk)[97](index=97&type=chunk) [Legal Proceedings](index=16&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in various legal proceedings incidental to its business, not expected to materially affect its financial condition or operations - The company is party to various legal proceedings incidental to its business, including product liability and warranty claims, but does not expect them to have a material adverse effect on its financial condition[98](index=98&type=chunk) [Mine Safety Disclosures](index=16&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section is not applicable to the company - Not applicable[99](index=99&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=16&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Apogee's common stock trades on NASDAQ, consistently pays dividends, and repurchased shares in FY2021, though its stock performance has underperformed relevant indices - As of the end of Q4 FY2021, the company has authorization to repurchase an additional **1,117,384 shares** under its program, which has no expiration date[105](index=105&type=chunk)[106](index=106&type=chunk) Total Dividend per Share | Fiscal Year | Total Dividend per Share | | :--- | :--- | | 2021 | $0.7625 | | 2020 | $0.7125 | | 2019 | $0.6475 | Q4 FY2021 Share Repurchases | Period (Q4 FY2021) | Total Shares Purchased (Public Plan) | Average Price Paid per Share | | :--- | :--- | :--- | | Dec 27, 2020 - Jan 23, 2021 | 160,139 | $37.44 | | Jan 24, 2021 - Feb 27, 2021 | 165,536 | $37.08 | | **Total Q4** | **325,675** | **$37.22 (weighted avg)** | [Selected Financial Data](index=19&type=section&id=Item%206.%20Selected%20Financial%20Data) This section provides a five-year summary of key financial data, showing a decline in net sales, operating income, and diluted EPS in fiscal 2021 compared to fiscal 2020 Selected Financial Data (in thousands, except per share data) | (In thousands, except per share data) | Fiscal Year 2021 | Fiscal Year 2020 | | :--- | :--- | :--- | | **Results of Operations** | | | | Net sales | $1,230,774 | $1,387,439 | | Operating income | $25,527 | $87,848 | | Net earnings | $15,436 | $61,914 | | Earnings per share - diluted | $0.59 | $2.32 | | **Balance Sheet Data (Year-End)** | | | | Total assets | $1,015,099 | $1,128,991 | | Long-term debt | $165,000 | $217,900 | | Shareholders' equity | $492,745 | $516,778 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses fiscal 2021 financial performance, highlighting an 11.3% net sales decrease, a significant GAAP operating income drop due to impairment, and strong operating cash flow from debt reduction and working capital management [Results of Operations](index=21&type=section&id=Results%20of%20Operations) For fiscal 2021, net sales decreased 11.3% to **$1.23 billion**, gross margin declined 60 basis points, and operating income fell to 2.1% of sales due to a **$70.1 million** impairment charge - The significant drop in operating income was primarily driven by a **$70.1 million** impairment expense on goodwill and intangible assets within the Architectural Framing Systems segment[125](index=125&type=chunk) - The effective tax rate rose to **31.7%** in FY2021 from **22.4%** in FY2020, mainly due to nondeductible goodwill impairment in Canada and the impact of unfavorable permanent items on lower earnings[126](index=126&type=chunk) Key Financial Metrics | Metric | FY 2021 | FY 2020 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $1,230.8M | $1,387.4M | (11.3)% | | Gross Margin | 22.4% | 23.0% | (60 bps) | | Operating Margin | 2.1% | 6.3% | (420 bps) | | Diluted EPS | $0.59 | $2.32 | (75)% | [Segment Analysis](index=22&type=section&id=Segment%20Analysis) In fiscal 2021, most segments experienced sales declines, with Architectural Framing Systems incurring a significant operating loss due to impairment, while Architectural Services saw sales and margin growth Segment Performance | Segment | FY 2021 Net Sales (M) | % Change YoY | FY 2021 Operating Income (M) | FY 2021 Operating Margin | | :--- | :--- | :--- | :--- | :--- | | Architectural Framing Systems | $570.9 | (16.9)% | $(44.8) | (7.8)% | | Architectural Glass | $330.3 | (14.7)% | $18.7 | 5.7% | | Architectural Services | $295.8 | 9.9% | $31.2 | 10.5% | | Large-Scale Optical (LSO) | $70.1 | (20.3)% | $31.2 | 44.5% | [Liquidity and Capital Resources](index=24&type=section&id=Liquidity%20and%20Capital%20Resources) The company demonstrated strong liquidity in fiscal 2021, with operating cash flow increasing to **$141.9 million**, enabling debt repayments, dividends, and share repurchases - The company deferred **$13.6 million** in employer Social Security tax payments under the CARES Act, which will be repaid in calendar years 2021 and 2022[150](index=150&type=chunk) - At fiscal year-end, the company had **$47.3 million** in cash and **$216.3 million** available under its revolving credit facility, and was in compliance with all debt covenants[151](index=151&type=chunk)[144](index=144&type=chunk) Cash Flow and Capital Allocation (in millions) | (In millions) | FY 2021 | FY 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $141.9 | $107.3 | | Capital expenditures | $(26.2) | $(51.4) | | Net repayments on debt | $(53.1) | $ (27.5) | | Repurchase of common stock | $(32.9) | $(25.1) | | Dividends paid | $(19.6) | $(18.7) | [Critical Accounting Policies](index=27&type=section&id=Critical%20Accounting%20Policies) Management identifies revenue recognition for long-term contracts and goodwill/intangible asset impairment as critical accounting policies, with a **$63.8 million** goodwill and **$6.3 million** intangible asset impairment charge in fiscal 2021 - Revenue on long-term, fixed-price contracts, representing about **36%** of total revenue, is recognized over time using a cost-to-cost input method, requiring significant judgment in estimating total project costs[159](index=159&type=chunk) - The company changed its annual goodwill impairment test date from fiscal year-end to the first day of the fiscal fourth quarter to better align with its planning processes[162](index=162&type=chunk) - In fiscal 2021, a quantitative impairment test led to a goodwill impairment charge of **$46.7 million** for the EFCO reporting unit and **$17.1 million** for the Sotawall reporting unit[166](index=166&type=chunk) - An impairment test of indefinite-lived intangible assets resulted in a **$6.3 million** impairment charge for the EFCO tradename[170](index=170&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=29&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to market risks from changes in interest rates, affecting net earnings, and foreign currency exchange rates, impacting reported financial results from Canadian and Brazilian operations - A hypothetical **200 basis point** change in interest rates over 12 months would impact net earnings by approximately **$0.5 million**[176](index=176&type=chunk) - The company is subject to foreign currency risk from its operations in Canada and Brazil, where changes in the Canadian dollar and Brazilian real exchange rates versus the U.S. dollar affect reported financial results[178](index=178&type=chunk) [Financial Statements and Supplementary Data](index=31&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's consolidated financial statements for fiscal year 2021, including balance sheets, income statements, cash flows, and notes, along with management's effective internal control report and auditor's opinion [Consolidated Financial Statements](index=36&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements show total assets of **$1.02 billion** and net earnings of **$15.4 million** for fiscal 2021, with **$141.9 million** in operating cash flow Consolidated Balance Sheets (in thousands) | (In thousands) | Feb 27, 2021 | Feb 29, 2020 | | :--- | :--- | :--- | | **Assets** | | | | Total current assets | $350,674 | $381,910 | | Goodwill | $130,098 | $185,516 | | Total assets | $1,015,099 | $1,128,991 | | **Liabilities & Equity** | | | | Total current liabilities | $217,552 | $276,857 | | Long-term debt | $163,000 | $212,500 | | Total shareholders' equity | $492,745 | $516,778 | Consolidated Statements of Operations (in thousands, except per share data) | (In thousands, except per share data) | FY 2021 | FY 2020 | FY 2019 | | :--- | :--- | :--- | :--- | | Net sales | $1,230,774 | $1,387,439 | $1,402,637 | | Operating income | $25,527 | $87,848 | $67,284 | | Net earnings | $15,436 | $61,914 | $45,694 | | Earnings per share - diluted | $0.59 | $2.32 | $1.63 | [Notes to Consolidated Financial Statements](index=41&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail a **$70.1 million** impairment charge in fiscal 2021, the company's debt structure including a **$150 million** term loan, and segment data, highlighting Architectural Framing Systems as the largest segment by assets and sales - In Q4 FY2021, the company recorded goodwill impairment of **$46.7 million** for the EFCO reporting unit and **$17.1 million** for the Sotawall reporting unit, plus an additional **$6.3 million** impairment for the EFCO tradename[293](index=293&type=chunk)[295](index=295&type=chunk) - In September 2020, the company sold a building in its LSO segment for **$25.1 million**, recognizing a gain of approximately **$19.3 million**[288](index=288&type=chunk) - As of February 27, 2021, the company had a **$150 million** term loan and a **$235 million** revolving credit facility (with no outstanding borrowings), both maturing in June 2024[298](index=298&type=chunk) - The company repurchased **1,177,704 shares** for **$32.9 million** in fiscal 2021 and has remaining authority to repurchase **1,117,384 shares**[334](index=334&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=67&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[362](index=362&type=chunk) [Controls and Procedures](index=68&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of fiscal year-end, with no material changes to internal controls during the most recent quarter - Management concluded that the company's disclosure controls and procedures were effective as of February 27, 2021[363](index=363&type=chunk) - There were no changes in internal control over financial reporting during the most recent fiscal quarter that materially affected, or are reasonably likely to materially affect, the company's internal controls[364](index=364&type=chunk) [Other Information](index=68&type=section&id=Item%209B.%20Other%20Information) The company reports no other information - None[365](index=365&type=chunk) Part III [Directors, Executive Officers, Code of Ethics and Corporate Governance](index=68&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%2C%20Code%20of%20Ethics%20and%20Corporate%20Governance) Information regarding directors, executive officers, code of ethics, and corporate governance is incorporated by reference from the company's 2021 Proxy Statement - Information required by this item is incorporated by reference from the company's 2021 Proxy Statement, to be filed within 120 days of the fiscal year-end[368](index=368&type=chunk) [Executive and Director Compensation](index=68&type=section&id=Item%2011.%20Executive%20and%20Director%20Compensation) Information regarding executive and director compensation is incorporated by reference from the company's 2021 Proxy Statement - Information required by this item is incorporated by reference from the company's 2021 Proxy Statement[369](index=369&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=68&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information regarding security ownership and related stockholder matters is incorporated by reference from the company's 2021 Proxy Statement - Information required by this item is incorporated by reference from the company's 2021 Proxy Statement[370](index=370&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=70&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information regarding certain relationships, related transactions, and director independence is incorporated by reference from the company's 2021 Proxy Statement - Information required by this item is incorporated by reference from the company's 2021 Proxy Statement[371](index=371&type=chunk) [Principal Accountant Fees and Services](index=70&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information regarding principal accountant fees and services is incorporated by reference from the company's 2021 Proxy Statement - Information required by this item is incorporated by reference from the company's 2021 Proxy Statement[372](index=372&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=70&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists the consolidated financial statements, a financial statement schedule, and various exhibits filed as part of the Form 10-K report - This item lists the financial statements, financial statement schedules, and exhibits filed with the Form 10-K[374](index=374&type=chunk) [Form 10-K Summary](index=73&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company did not provide a Form 10-K summary - None[380](index=380&type=chunk)

Financial Data and Key Metrics Changes - Total revenue decreased by 8% compared to the previous year's fourth quarter, primarily due to softness in non-residential construction markets and project delays [14][15] - Adjusted operating margin improved to 7.1%, a 190 basis point increase from last year's fourth quarter, driven by cost savings initiatives [16] - Adjusted EBITDA rose to $36.2 million from $29.9 million in the previous year's fourth quarter, reflecting improved execution and cost actions [16] - GAAP loss was $1.65 per share, while adjusted EPS grew by 26% to $0.63 per diluted share [17] Business Line Data and Key Metrics Changes - Architectural Framing Systems experienced a 14% revenue decline in the quarter and a 17% decline for the full year, with an adjusted operating margin of 2.7% [17][18] - Architectural Glass revenue was $82 million, down from $98 million in the previous year's fourth quarter, with an adjusted operating margin of 4.4% [18] - Architectural Services revenue increased by 12% to $82 million, with operating income growing by 26% to $10.7 million and a margin improvement to 13.1% [18][19] - Large-Scale Optical revenue remained flat at $22 million, with operating margins of 28.1% [19] Market Data and Key Metrics Changes - The non-residential construction market is entering a downcycle, with uncertainty regarding the duration and nature of the rebound [9][25] - Architectural Services is positioned for growth, executing on projects from its substantial backlog [25] - The company anticipates continued pressure on operating margins in the Architectural Glass segment due to lower demand and higher fixed costs [25] Company Strategy and Development Direction - The company aims to drive near-term cost and operational improvements while positioning for long-term sustainable growth [10][12] - Focus will be on talent management, operational execution, and transforming the enterprise to enhance competitiveness [11][12] - A new enterprise strategy will be developed to identify high-potential markets and improve returns on investment [12][29] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the challenges posed by the pandemic and the current downturn in non-residential construction, but sees it as an opportunity for transformation [9][44] - There are positive signs in leading indicators, suggesting potential recovery in fiscal '23, but near-term pressures remain [42][43] - The company plans to invest in its enterprise strategy and core processes to better position itself for future growth [25][29] Other Important Information - The company achieved record free cash flow of $116 million, more than double the previous year's level, and paid down $53 million of debt [22][23] - A 7% increase in dividends was announced, with $52.5 million returned to shareholders through dividends and share repurchases [24] Q&A Session Summary Question: How do different areas of Apogee align with the non-residential cycle? - Management indicated that the Services business is strong, while Glass and short lead time Framing are softer, suggesting Services may lag in recovery [31][32] Question: Will shorter lead time Framing recover quickly? - There is expected to be a lag in recovery for shorter lead time projects, with continued pressure across all businesses [34] Question: What is the impact of raw material inflation? - Management acknowledged raw material inflation as a challenge but emphasized strong procurement efforts to offset these pressures [40][58] Question: What is the outlook for the Services business? - The Services business is expected to face some revenue pressure in fiscal '23 and '24, but management is confident in their ability to book new orders [82][84] Question: Are there supply chain issues affecting the business? - Limited disruptions have been observed, with a focus on North America for supply chains, minimizing significant challenges [78] Question: What is the status of the EFCO business? - EFCO is part of the Architectural Framing Systems segment and is making progress as part of an integrated strategy [76] Question: What are the expectations for the high velocity glass plant? - The plant is facing challenges in reaching breakeven volumes, and management is assessing its future as part of the strategic planning process [88]

Apogee Enterprises, Inc. (NASDAQ:APOG) Q3 2021 Earnings Conference Call December 18, 2020 9:00 AM ET Company Participants Jeff Huebschen - VP, IR & Communications Joe Puishys - CEO, President & Director Nisheet Gupta - EVP & CFO Conference Call Participants Chris Moore - CJS Securities Brent Thielman - DA Davidson Bill Dezellem - Tieton Capital Eric Stine - Craig-Hallum Julio Romero - Sidoti & Company Operator Ladies and gentlemen, thank you for standing by and welcome to Apogee's Fiscal 2021 Third Quarte ...